A proposed model for micro-credit : the individual loans programme - the Foundation for International Community Assistance, Durban.
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"Give poor communities the opportunity, and then get out of the way" Philosophy of FINCA Research has shown that in the provision of financial services to the poor there are two highly distinct approaches. The one considered the 'formal institutional approach', which attempts to provide these services but are motivated by the need to maintain financial sustainability and therefore generally operate on a wide scale, with large clientele that would not be served by the formal banking sector. The second encompasses those providers who are purely motivated by the need for the social upliftment of poor communities. Their aim is to effect change in the living standards of the poor via financial assistance and the encouragement of economic empowerment and independence. The Foundation for International Community Assistance (FINCA), whose aims and objectives, whilst falling into the latter category of providers still needs to address the question of sustainability, as it is solely dependent on donor funding. Most donors usually demand clear and sustainable results. This places an onerous task on the managers and providers of credit for social development to design sustainable and practical models for disbursement and payback. The financial services industry is still grossly underdeveloped in its ability to cater to the socio-economic needs of people and communities around the world. While there have been enormous innovations in the for-profit financial services industry, there have been few breakthroughs in the ways social sector activities iv are funded . As a result social entrepreneurs are attempting to create alternate financial services and models of funding for social ventures. Dr. Younus, of The Grameen Bank, has given birth to dozens of new enterprises using what he calls 'social venture capital'. Many initiatives are under way to explore a better way of financing social ventures. However, the question still remains, Can and do these Programmes extend the Philosophy of Pro-Poor Upliftment yet Maintain Financial Sustainability? Against this backdrop, the Individual Loans Programme was designed and piloted by FINCA - Durban. The Individual Loans Programme claims to economically empower poor communities yet be financially sustainable for FINCA. Its pilot phase analysis reveals many merits in its approach and financial sustainability if evaluated solely against the criteria mandated by FINCA. Utilising the Consultative Group to Assist the Poorest (CGAP) guidelines in setting interest rates and assuming costing values, an appropriate interest rate falls between 41 % and 44% for the Individual Loans Programme. The fact that it charges an interest rate of 84% per annum more than meets the requirements of financial sustainability. However, if it aims to reach the truly poor, then not only are its charges exorbitant but its strategy contains many requirements contrary to pro poor practices and therefore revisions in its dispensation are needed as it fails in terms of a pro poor model of micro finance practice.